FGN Savings Bond September Offers Open with Higher Coupon Rates

Goddy Egene

The Federal Government of Nigeria Savings Bond (FSB) offer for September opened on Monday and is expected to close on Friday.

The offer, according to the Debt Management Office (DMO), has two and three years tenure. The 2-year FSB due September 20, 2019 has coupon of 13.817, while the 3-year FGNSB due September 20, 2020 has 14.817 per cent.
The coupon rates for September are higher than the rates for August that were made at 13.535 per cent and 14.535 per cent for the two and three years’ tenures respectively.
As usual, the minimum subscription is N5,000, while maximum subscription is N50,000. Additional subscription is in multiples of N1,000 thereafter.

The DMO had last March introduced the FSB on behalf of the federal government as part of its efforts to promote savings culture in Nigeria and improve financial inclusion, particularly amongst retail investors.

The bond is expected to also provide additional funding for the government. However, investors’ participation in the FSB has remained low despite the increase in the coupon rate (interest rate) on the bond.
Commenting on low patronage, analysts at FSDH Research said one of the factors responsible for the poor patronage of FSB is the rally that dominated the equity market in recent time.

“The Nigerian Stock Exchange All Share Index (NSE ASI) appreciated by 51.47 per cent between March 01, 2017 and August 9, 2017. Many retail investors diverted funds to the equity market to take advantage of capital appreciation. Other factors are: the low awareness of the benefits and characteristics of the Bond; the low liquidity of the Bond at the secondary market and the high yield on the Nigerian Treasury Bill (NTB),” they said.

Speaking on how to increase investors’ patronage, they said the DMO and the stockbrokers can organise investors’ road shows in various cities and schools across the country.

“This will be an avenue to directly engage retail investors on the need for them to hold the bonds in their investment portfolio. The DMO can work with some identified large corporate organisations that have large number of employees to encourage their employees to invest in the Bonds on a monthly basis. The DMO can also work with government agencies to encourage civil servants to invest in the bond,” the analysts stated.

According to them, these strategies should be able to attract a minimum of one million subscribers on a monthly basis.